Reference no: EM132550814

Questions -

Q1. Net income reported for the current year was $200,000. Depreciation expense was $35,000. During the year, Accounts Receivable and Inventory increased $18,000 and $26,000, respectively. Prepaid Expenses and Accounts Payable decreased $4,000 and $9,000, respectively. There was also a loss on the sale of equipment of $6,000. Using the indirect method, how much cash was provided by operating activities?

a. $210,000

b. $244,000

c. $192,000

d. $182,000

Q2. York Ltd. reported a loss of $10,000 for the year. During the year, accounts receivable decreased $3,000, inventory increased $5,000, accounts payable increased by $11,000, and depreciation expense of $6,000 was recorded. Using the indirect method, operating activities

a. used net cash of $23,000.

b. provided net cash of $5,000.

c. used net cash of $17,000.

d. provided net cash of $15,000.

Q3. Suppose an entry was made on March 1, 2016 to prepay a one-year insurance policy for $1,800. Instead of debiting the prepaid insurance account, the bookkeeper debited the prepaid rent account instead. What is the correct entry to reverse this error?

a. Debit Prepaid Insurance for $1,800; Credit Cash for $1,800.

b. Debit Prepaid Insurance for $1,800; Credit Prepaid Rent for $1,800.

c. Debit Cash for $1,800; Credit Prepaid Insurance for $1,800.

d. Debit Prepaid Rent for $1,800; Credit Cash for $1,800.

Q4. AAA Company has a December 31 year end. On January 1, 2016, AAA Company took out a $50,000 bank loan. The loan has an interest rate of 10% annually. The loan and the interest will be paid at the end of five years. What adjusting entry is necessary on December 31, 2016?

a. Decrease cash $5,000; decrease bank loan payable $5,000

b. Decrease bank loan payable $5,000; increase interest expense $5,000

c. Increase interest payable $5,000; increase interest expense $5,000

d. No entry is required